Current Affairs
Predator Pricing by
Airlines
What is Predatory Pricing?
·
Means deliberately selling product below the cost price, to
eliminate competition.
·
Usually predatory pricing is done by firms with deep pockets
(like Walmart), because they can afford to make such temporary losses.
·
in short, it may appear good to customers- because products
available @cheap rate
·
But in long term, the firm establishes monopoly and starts
exploiting the same customers.
·
Sometimes the strategy misfires, company makes heavy losses (e.g.
AirDeccan and Kingfisher).
Why Spicejet accused of Predatory pricing?
·
They’ve launched a scheme “One Rupee Air ticket”
·
Sounds good? but there are hidden terms and conditions
Ø
Offer valid only if you book tickets during April 1 to 3.
Ø
Only one or two seats offered in each flight under “One rupee”
scheme.
·
So this is both “predatory pricing” + misguiding customers.
·
Spicejet already making losses, and now they’ve launched this
scheme=> other aviation companies
will also be forced to launch similar schemes to stay on competition =>
everyone starts bleeding and making losses=> ultimately some get on verge of
collapse like Kingfisher= staff salary not paid, loss EMIs not paid, Bank NPA
increases and so on….
What has DGCA done?
·
Directorate General of Civil Aviation (DGCA) is empowered to take
action against such predatory pricing (under Aircraft rule #135)
·
He has ordered Spicejet to immediately stop this scheme.
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